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Friday, April 07, 2017

Cornering the World Market

"China did not corner the world rare earths market by accident. 'The Middle East has oil. China has rare earth', said Chinese leader Deng Xiaoping in 1992, in recognition fhat rare earths are commodities strategic in both military and economic planning. At the Chinese government's direction, domestic state-owned firms, unrestrained by environmental niceties, then set about churning the Chinese landscape, while Chinese multinationals such as CNOOC, money being no object, scoured the world buying out rare earths producers abroad whenever foreign governments let them. In one attempt during the George Bush administration, CNOOC tried but failed to obtain Molycorp's mine."
Lawrence Solomon, policy director, Probe International, Toronto
Bucket grabs rare earth, Jiangsu Province
Not Rare, but PreciousThough rare-earth minerals, comprised of 17 elements on the periodic table are called rare, they are actually common. But they are scattered in small amounts within soil such as that pictured here, at a port in Jiangsu Province, China. That makes mining rare-earth minerals costly and environmentally taxing.

Sounds exotic, doesn't it, the descriptive of 'rare earth'. What it describes is minerals that exist in minuscule quantities in soil. They may be dispersed widely around the world, but finding them in their excruciatingly small quantities is what makes them 'rare'. They are, however, of immense importance in today's world of technological advances.

Representing minerals with strange names like scandium, yttrium, lanthanum and many others reflecting 17 little-known chemical elements, but vital to manufacturers of cellphones, computers, TVs and a range of electronic products such as laser-guided missiles, fighter jet catapults launched from aircraft carriers, including the F-35 fighter jet beloved of the Pentagon.
Worker displaying samples of rubidium, iron, and boron in Jiangxi Province
A worker displays samples of rubidium, iron, and boron at a workshop in Ganzhou City. China used to export almost all its rare-earth metals, but increasingly needs more of it for its own industrial uses. That is one of the reasons the Chinese government says it is restricting exports now.

They are, in other words, indispensable to the manufacture of products of everyday use and those meant for the military.

The United States had its home-grown supplier of rare earth minerals. This was Molycorp, which established its search for these products in the Mojave Desert, until its 2015 bankruptcy. Remember the recession of 2008 when the U.S. government was quick to bail out U.S. auto manufacturers? It made no such move on behalf of its sole producer of rare earth elements.

The backstory is that the Obama administration appealed to the World Trade Organization because Apple and similar other companies complained  about the China-dominated market jacking up prices. China responded to the WTO appeal by increasing its export of rare earths and in the process reducing their price to an extent that Molycorp could not match and still remain in business, leading to its bankruptcy.

Which led to the situation that high-tech manufacturers worldwide have few options but to buy from China. There are no competitors. So the United States, for one, with its powerful manufacturing base of advanced technical products is utterly dependent on China's rare earth exports; this means by extension that America's military markets depend on China to enable their manufacturing of rare earth-dependent products.

The new American administration under President Donald Trump harrumphs about jobs being lost in the United States, and of course China is a signal source of those lost manufacturing jobs. Molycorp employed 500 people, not a huge number of employees, but significant for what they produced and the assurance they granted to American manufacturers that rare earth products were to be reliably domestically sourced.

Rare-earth mineral display in Baotou, Inner Mongolia
When combined with magnetic metals such as iron, rare-earth minerals create super-strong permanent magnets that are impossible to move with one's bare hands. A little rare-earth metal goes a long way. The strength of these rare-earth-enhanced magnets have helped to miniaturize electronics and to reduce weight in electric cars. Here, samples of rare-earth compounds are displayed in a showroom at Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Company, China's largest rare-earths producer.

As an interesting example, in a territorial dispute with Japan resulting from the Japanese navy detaining a Chinese fishing boat for playing their trade in Japanese waters, China stopped sales of rare earths to Japan. That incident caused prices to soar 4,000 percent worldwide, and of course left Japan temporarily without that critical manufacturing resource.

Similarly in 1994 China acquired U.S.-based Magnequench, established by General Motors to highlight its invention of the rare-earth-based neodymium-iron-boron magnet. The U.S. stipulated as a condition of the sale of such a strategic business, that the business remain operational for five years within the United States. As soon as that period elapsed, the U.S. operation was shuttered and China relocated the processes and the intellectual property to monopolize the market, to China.

Perhaps because Donald J. Trump comes from the cutthroat world of business enterprise, he is a step ahead of the Chinese penchant to highjack from willing enough dupes critical infrastructure and manufacturing along with the research enabling it, in a more cautious way than his predecessors. When Presidents Trump and Xi met this week in Washington there was doubtless much to discuss beyond the wild card of North Korea's maniacal Kim Jong-un.
Man pours rare-earth-mineral lanthanum in Inner Mongolia
The U.S. Department of Energy says that deployment of clean energy technology could be slowed in the coming years by supply challenges for at least five rare-earth metals. Here, a worker pours the rare-earth metal lanthanum, which is used in camera lenses and other types of glass, into a mold at a smelting workshop in Inner Mongolia.

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